Thus far, 2024 has been the year of AI — and although stock market darling and semiconductor leader Nvidia (NASDAQ: NVDA) has been the most publicized winner of this new industry’s rapid rise, big data analytics company Palantir (NYSE: PLTR) could secure better yearly returns.
After all, it is currently in the lead — whereas NVDA is up 196.78% since the beginning of the year, PLTR has secured gains of 268.28% in the same timeframe. At press time, Palantir stock was trading at $61.06 apiece.
Palantir has long been a favorite of retail investors — in contrast, institutional investors spent most of the last couple of years openly doubting the stock. After a standout Q3 2024 earnings call on November 4, that perspective has shifted — hedge funds are now purchasing large quantities of PLTR shares, while Wall Street equity analysts are setting increasingly higher price targets.
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It would not be a stretch to say that an atmosphere of greed is present — and with the hype surrounding both the wider AI industry and Palantir, it’s more important than ever to take note of and heed dissenting voices. Valuation has long been one of the primary concerns surrounding the Alex Karp-led business — and the recent surge in price has done nothing to dispel those worries.
In stark contrast with most of his colleagues, one Jefferies researcher has set a price target that would correspond with a 60% decrease in PLTR share price — let’s take a closer look at his rationale.
Jefferies analyst Brent Thill sees significant downside for PLTR stock
On November 7, Jefferies software and internet researcher Brent Thill downgraded Palantir stock to ‘Underperform’ from his prior ‘Hold’ rating. His previous price target of $28 remains unchanged.
Shares of the AI software infrastructure company are currently trading at a 43 times multiple of its calendar 2025 revenue. As noted by Thill, the last time such conditions were seen in the tech sector was the Covid bubble. However, seeing as how macro conditions have normalized, this is no longer a common sight — Palantir’s multiple is currently over four times as large as its next comparable peer.
The expert added that although Palantir’s fundamentals ‘are alive,’ the company would have to accelerate growth to 40% for four years straight and trade at 12x estimated 2028 revenue ‘just for the stock to hold its price, which seems unlikely.’
At present, Thill deems even current prices unsustainable — and his arguments seem to hold water. In addition, the researcher pointed out that insider selling activity has picked up — most notably, CEO Alex Karp sold $398 million worth of PLTR stock on November 13.
That’s not to say that he is completely bearish when it comes to the business — while he urged caution, the Jefferies analyst added that investors should wait for a better entry point — suggesting that, though he does believe in the company’s continued success, he foresees a steep correction in the short and medium term.
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